The government might be doing well at the moment but it needs to build up buffers to make sure that it can cope with the impact of an aging population, the Fiscal Advisory Council has warned.

According to the European Commission’s projections, Malta has the second-highest projected increase in age-related expenditure in relation to GDP between 2016 and 2070, in relation to higher outlays for pensions, health care and long-term care.

The Commission assessment had reported that there was low risk to the sustainability of public finances in the short term and medium term, and medium risk in the long term.

The council was commenting in its assessment of the Medium-Term Fiscal Strategy for 2018 to 2021, as outlined in the latest Update of Stability Programme.

In 2017, for the second-year running, a fiscal surplus was achieved, amounting to 3.9% of GDP, was substantially higher than originally anticipated.

As a result, the reduction in the debt ratio accelerated, declining to 50.8 per cent of GDP as at end 2017.

The council confirmed that in 2017 there was full compliance with the fiscal rules prescribed by the Stability and Growth Pact and the Fiscal Responsibility Act.

However, the council suggested that long-term fiscal issues should be given even more priority in the economic discussions between the constituted bodies and the government.

“The prevailing benign macroeconomic and fiscal conditions offer a window of opportunity for carrying out the necessary reforms to address such long-term challenges,” it said.

The full report, entitled “Overall Assessment –Update of Stability Programme 2018 –2021”, is available on the website of the MFAC http://www.mfac.org.mt.

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